Wipfli Outlines What a Democratic-Led Congress Could Mean for Taxes, Tariffs and Regulations

MILWAUKEE, Nov. 6, 2026 /PRNewswire/ -- The midterm elections saw the Democratic Party regain majority control of both houses of Congress, and Wipfli's tax and advisory professionals are outlining what the shift could mean for businesses. The current Congress returns on November 9, giving the Republican majority one last chance to pass its legislative agenda. Expect a primary focus on spending bills. Reconciliation 3.0 could make a comeback as a way to pass legislation. Once the new Congress is seated, the President's veto power may temper Democratic priorities.

"The election changes who writes the rules, but the President's veto power means the most likely outcomes will come in areas of broad agreement, such as improved IRS services, housing, healthcare affordability, digital assets, retirement and domestic investment. At the same time, businesses should be watching tax, AI, financial services, tariffs and healthcare together, because changes in one area can carry operational and financial implications well beyond the tax function," said Brian Coddington, senior manager, Wipfli.

Here's what could be on the horizon over the next two months and into the new year.

The lame-duck session of Congress

After congressional elections every two years, Congress enters a lame-duck session when the current Congress can still pass legislation before the new Congress is sworn in early the next year. The main legislative priorities will most likely focus on spending. None of the 12 regular 2027 appropriation bills have been enacted. Also on the table is the 2027 National Defense Authorization Act, which doesn't appropriate funds for the military but sets spending and other military policy priorities for the coming year.

Congressional Republicans may try to move legislation through a budget reconciliation bill, which is a special process for bills affecting federal spending, revenue or the debt limit. The process starts when the House and Senate adopt the same budget resolution with instructions to designated committees. The upside of reconciliation is that it requires only 51 votes to pass the Senate instead of the normal 60 votes required by the "Byrd Rule."

So far this year, only the House has passed a budget resolution. Complicating matters, Congress has only four weeks of work scheduled before the end of the year. While reconciliation bills have passed in as few as 28 days, they usually take closer to 150. Tax issues generally haven't come up in recent public discussions of the lame-duck legislative agenda.

If tax matters are on the table, five areas of focus are likely:

• Several popular tax extenders, like the Work Opportunity Tax Credit, have expired.
• The Senate unanimously approved the Taxpayer Assistance and Service Act in September, which aims to modernize IRS processes and increase taxpayer protections, but the House would need to act to move it forward.
• The bipartisan Digital Asset Tax Certainty Act cleared the House Ways and Means Committee by a large margin but hasn't passed the full House.
• A U.S.-Taiwan tax relief bill to reduce double taxation for qualifying U.S. and Taiwanese taxpayers remains stuck in the Senate.
• The temporarily enhanced ACA premium tax credits expired at the end of 2025. The House approved a three-year extension in January, but the Senate hasn't approved it.

What to expect from the Democratic Congress

Their victory in the midterm elections will flip control of Congress's tax-writing committees to the Democrats in the new year. At least 35% of Republican tax writers lost reelection or retired, compared with only 22% of Democrats. Regardless of party, this election has resulted in a substantial loss of tax-writing experience.

Turning to possible legislative priorities and impacts, here's what we anticipate:

Taxes

First, traditional Democratic priorities, such as clean energy and higher taxes on high earners, will face two primary constraints. President Trump can use his veto power, so bills will need a bipartisan, veto-proof majority or terms that both Congress and the President will accept.

Legislation will also face a backdrop of voters in several states rejecting or capping tax increases, including California's failed wealth tax and Florida's property tax reduction. If tax changes do occur, expect legislation to pass in areas of broad agreement, such as improved IRS services, housing, healthcare affordability, digital assets, retirement or domestic investment.

AI regulations

The shift in congressional power introduces a new chapter for artificial intelligence regulation in the United States. Under Republican leadership, Congress largely deferred to the executive branch and industry self-governance on AI development, resisting broad federal mandates in favor of innovation-first principles. With Democrats now holding the majority, that posture is likely to change.

Democratic lawmakers have consistently pushed for stronger consumer protections, algorithmic accountability and transparency requirements for AI systems. We expect to see renewed momentum behind federal AI legislation that addresses bias in automated decision-making, data privacy standards and liability frameworks for AI-generated harm. Under Democratic chairmanship, committees such as the Senate Commerce Committee and the House Energy and Commerce Committee will likely hold high-profile hearings and advance regulatory bills that impose more structured requirements on AI developers and deployers across industries, from financial services and healthcare to hiring and housing.

The buildout of AI infrastructure, particularly large-scale data centers, is also drawing increased congressional scrutiny. Democrats have raised concerns about the energy consumption, water usage and environmental impact of hyperscale data centers. Legislation or committee action targeting data center permitting, energy sourcing disclosures and emissions reporting requirements is increasingly likely, particularly in states and districts where data center expansion has become a local flashpoint. Thirteen states had ballot measures addressing data centers in 2026. In many cases, voters chose to limit or prohibit data centers in their city or region.

"Technology companies and AI developers should engage with policymakers now and prepare for disclosure and compliance obligations that haven't existed at the federal level before," Coddington said.

More scrutiny on the financial industry

The financial services industry should prepare for a markedly different regulatory climate. Much of the deregulatory momentum that defined financial sector policy under the Trump administration — including rollbacks to bank capital requirements, loosened consumer protection enforcement and a more permissive posture toward fintech and non-bank lenders — could face resistance or reversal as Democrats assume committee leadership roles.

Congressional Democrats are expected to use their oversight authorities aggressively. The House Financial Services Committee and the Senate Banking Committee will likely launch investigations into areas such as bank merger approvals, compliance with fair lending laws and the conduct of large financial institutions during periods of economic stress.

Democrats have also signaled interest in reinstating or strengthening elements of Dodd-Frank that were modified under prior legislation, particularly regarding stress-testing thresholds and consumer-protection rules administered by the Consumer Financial Protection Bureau (CFPB). Expect increased scrutiny of the CFPB's enforcement posture and potential legislative efforts to expand its authority and funding stability.

Cryptocurrency and digital assets represent another area of heightened focus. Democratic leaders in Congress have been skeptical of the light-touch approach the administration has taken toward crypto markets. Calls for mandatory disclosures, enhanced anti-money laundering compliance and stronger oversight of digital asset exchanges are expected to intensify. After several high-profile collapses in the digital asset space, momentum for a comprehensive federal crypto regulatory framework is building, and a Democratic-led Congress is more likely to prioritize subjecting crypto firms to regulations comparable to those for traditional financial institutions.

"Financial institutions should revisit their compliance programs, strengthen internal audit and get ready for a more active examination cycle," Coddington said.

Tariffs

Trade policy and tariffs are among the most contentious points between Democrats and the Trump administration. President Trump has relied heavily on executive authority to impose tariffs without formal congressional approval. Democrats have been critical of this approach, citing harm to domestic manufacturers, agricultural producers and consumers, who face higher prices on imported goods.

Expect Congress to push back through multiple channels. Democrats may advance legislation to reclaim congressional authority over tariff imposition, requiring executive branch tariffs above a certain threshold to receive congressional approval. They may also use the appropriations process to impose restrictions or reporting requirements on the collection and use of tariff-related funds. Investigations into the economic impact of specific tariffs could move quickly through committee.

That said, any outright tariff rollback faces significant obstacles. The President retains broad executive authority over trade policy, and not all Democrats are uniformly opposed to using tariffs to protect domestic manufacturing jobs. The result is likely to be a contested and nuanced battle over trade policy, with Democrats pushing for oversight and process reforms rather than wholesale elimination of the existing tariff structure.

"Manufacturers, distributors and importers need to watch executive and legislative trade moves at the same time and stress-test their supply chains against multiple tariff scenarios," Coddington added.

Healthcare funding

Healthcare policy could become one of the most consequential battlegrounds of the new Congress. Democrats will enter the new year with a clear set of priorities: reversing the 2025 federal healthcare spending cuts, eliminating mandatory Medicaid work requirements and locking in the enhanced Affordable Care Act subsidies that have been central to expanding coverage over the past several years.

On spending, Democrats are likely to use budget negotiations and appropriations leverage to push back against cuts to Medicaid, Medicare and public health programs that advanced under the Republican-led Congress. While the President's veto power limits what can ultimately be enacted, Democrats can use the threat of a government shutdown and must-pass spending vehicles to protect healthcare funding or force targeted restorations.

Healthcare organizations should monitor these developments closely, as changes to Medicaid eligibility, subsidy structures and federal reimbursement rates will have direct operational and financial implications.

How businesses can prepare for tax and regulatory change

Businesses are better positioned when they model how proposed tax changes could affect them and track new compliance requirements before legislation passes.

Read more

• Year-end planning for state and local taxes
• 2026 year-end tax planning update for closely held businesses and individuals
• You earned over $500,000 this year. What are your best year-end tax planning strategies? 

About Wipfli

Wipfli is a leading national advisory and accounting firm with nearly 100 years of serving ambitious middle-market organizations. We understand our clients' unique challenges and help them succeed on their terms through assurance, tax, advisory, outsourcing and technology services. With 2,900+ associates and global alliances, we combine national capabilities with local relationships. Wipfli operates under an alternative practice structure: Wipfli LLP, a licensed CPA firm, provides attest services, while Wipfli Advisory LLC, a non-CPA firm, delivers business advisory and non-attest services. Learn more at wipfli.com or contact Alicia O'Connell at [email protected]. 

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SOURCE Wipfli